Dear Sir/Madam 

Re: Your refusal to refund unfair mortgage arrears charges

I write in response to your letter refusing my request for a refund of mortgage arrears charges. I note your position is that I am not entitled to a refund because the terms and conditions of my mortgage allow you to impose charges where I have failed to pay my monthly mortgage.  In that regard, I would ask you to note the following.

Your company insists it can impose charges in accordance with its terms and conditions of contract. However, those terms and conditions are subject to the common law and the Unfair Terms in Consumer Contract Regulations 1999 (UTCCR). Indeed, the UTCCR takes precedence over any contractual term where the court finds a term to be 'unfair'. The court can then treat that term of contract as having no legal effect.

The question that arises is this: are your mortgage arrears charges unfair in terms of the UTCCR? 0n 26 July 2005 the OFT stated that 'a charge is likely to be disproportionately high if it is more than a court would be likely to award if the lender sued the cardholder for breach of contract'. 0n 5 April 2006 the OFT stated that default charges which are set at more than £12 will be presumed to be unfair and unenforceable in terms of the UTCCR. Charges above this sum will be subject to legal action by the OFT (press release 68/06 - online here: http://www.oft.gov.uk/News/Press+releases/2006/68-06.htm).  Since then almost all UK companies operating credit cards have substantially lowered their charges.

So what would the court award your company for my minor breach of contract? As you will be aware, the court will only award (in a non-negotiated consumer contract) a sum to reimburse actual loss. Your charges do not reflect actual loss. Rather, they include a massive profit margin or penalty.

Accordingly, your charges do not reflect the actual loss in my case. They are an illegal penalty charge designed to recover money unconnected with the conduct of my mortgage account. Please advise whether you have an appeals procedure, and if so, please treat this letter as a request for an appeal against your decision not to refund unfair mortgage arrears charges.

If I do not hear from you within the next 7 days, I will - 

(a) raise an action of payment at my local court. In that eventuality, I would require you to lodge in court financial vouching for the actual loss sustained in my case, together with your full financial accounts revealing how much income is generated from your mortgage arrears charges, as against the cost of administering missed monthly mortgage payments; or

(b) submit a formal complaint to the UK Financial Ombudsman.

I look forward to your urgent response. 

Yours faithfully 

(signed)